Sesame, one of Britain’s largest financial firms has been fined £6 million by the Financial Conduct Authority for mis-sold financial products. Tens of thousands of people lost out when the investment firm Keydata used their clients’ cash to purchase bonds which they used to fund the purchase of bundles of US life insurance policies.

Sesame Mis-Sold Fiancial Products

According to the FCA, Sesame has multiple problems in its systems, one of which is its obvious failure to properly advice its clients and to explain how their money was going to be used. The appointed representatives (ARs) we not properly overseen by the company and that contributed to the loss they incurred from the collapse of Keydata.

Between the year 2005 and 2009 Sesame encouraged its clients to invest more than £6 million in Keydata and majority of the products were mis-sold. The initial fine was £8.6 million but the FCA reduced it to £6 after Sesame agreed to settle the case before the investigation went further.

The fine was Sesame’s third in nine years and it has generated heated debate on financial forums with some people supporting it and some claiming that the amount was too high. Sesame had engaged in widespread mis-selling, had very poor oversight and failed to heed continuous warnings by the FCA. The warnings took place over 7 years and in every Keydata product the FCA investigated, Sesame failed to give its clients proper information regarding the key risks associated with the investment, as well as failing to mention objectively the advantages and disadvantages.

A huge number of customers were advised to invest considerable sums of their funds into Keydata, something they came to regret when the company collapsed. The average age of Sesame clients who lost money in Keydata was 60, which means that a significant number of them were in fact above the retirement age.

What the investment firm lacked was oversight. For instance in 2005 Sesame reviewed the secure income bond and concluded that “it might be best to consider this product only as a small part of a diversified high-income strategy- even on a client specific basis”. But still, the company somehow advised a 79 year old lady to invest £138,606 in Keydata, which was 80% of her total savings, despite her seeking only a “minimum amount of risk to your capital”.

In the four years between 2005 and 2009 Sesame looked at 45 sales of Keydata products, and concluded that only four of them were unsuitable, the above not included. In 2009 the FCA voiced concerns and directed that a skilled individual be hired. The same person posted a review the following year in which they stated categorically that they saw no evidence of widespread unsuitable investment advice.

Incidentally this was a year after directors of Keydata had been banned from selling any form of investments. The £6 million fine is indeed big, but looking after reviewing the details of the case and seeing the extend of their misconduct, one can see how the FCA would come to that figure. Sesame continued to ignore a series of warnings from the FCA for a long time before this investigation in fact it’s a surprise they didn’t sell their clients on other ill-fated investments.

Retail investors have to stay sharp and informed in order to secure their assets in the face of shrewd advisers. The FCA has just about finished publishing the final rules to ban risky investments targeted on retail investors. The financial governing body announced that it would no longer allow the existence of specific high-risk investment schemes which in the past have been advertised to residents in the UK.

Unregulated collective investment schemes and non-mainstream pooled investments are being scrutinized in the wake of Keydata’s fall and Sesame has to set some redundancies in their systems. Retail investors have more to hope for in the next year as financial firms adjust to more stringent regulations.

Maple Leaf Financial

Each mis sold investment case is different and they are all assessed individually. Sometimes we can claim because investments were simply unsuitable and they were mis-sold. In other cases it may be because of technical shortcomings in contracts, regulatory issues or a combination of these factors.

‘Most of our clients had no idea there was a problem with their policies or investments before they spoke with us. You have nothing to lose by calling Maple leaf financial investment mis-selling to find out about your own arrangements.

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.